Remisier versus Online Trading

Stock market is one form of investment that is very popular amongst investors. Considering the need to read and monitor the market movement closely and be in the loop to make the right decision instantly, some investors who participate in stock market activities would usually rely on remisiers to carry out the necessary transactions.

Remisiers are qualified stock brokers and their licenses are updated on a yearly basis to ensure a consistent level of competency in rendering their services to their clients (the investors). These remisiers would usually call their clients to indicate the current situation of stock prices and offer professional advice whether to buy, sell or hold on with what their clients have.

At the end of this article, readers will be able to identify the differences between engaging a remisier and using online trading for investment. Readers will also be able to see the pros and cons of both methods and make an informed decision whether to use the services of a remisier or use online trading.

Using Online Trading

With the advancement in internet technology, investors can also obtain live updates on the current stock market and could now choose to invest via online trading without the need to rely on remisiers. Online trading is an electronic client ordering system which allows you, as investors, to place orders electronically via the Internet to investment banks and stock brokerage companies. Orders that you placed will be routed by your remisier or dealer to Bursa Malaysia for execution.  Many companies offer on-line stock brokering services to meet the increasing demand of on-line traders. This is especially so for those younger investors who are computer savvy and prefer to carry out their own transactions at their convenience. Online trading may be easier for retail investors to do their own stock trading online.

However, these online trading websites sometimes offer too much information such as the various places to get live quotes, how to do order confirmation and many charts to be studied. For those with basic investment background and are technology savvy, it may not be very difficult to understand the information provided. However, for laymen who want to start investing, it requires a lot of time to navigate through and understand the information provided.

The main advantage that online trading has over the traditional remisier is the seemingly cheaper transaction costs. Comparing the brokerage fees for remisier versus online trading, it is cheaper to trade online due to the elimination of human handling layer. This is what we call the explicit trading costs. It includes all of the direct trading costs, such as brokerage fees, clearing fees and stamp duties

However, there is also another kind of cost known as the implicit trading costs. Implicit trading costs, as the name suggests, are indirect trading costs which are not easily quantified. These include market impact costs, opportunity costs and missed trade cost.

• A market impact cost is the realised profit or loss due to the price movement of a share from the time the buy or sell decision was made to the actual execution price.
• Opportunity cost is the value of the next-best choice available to someone who has to pick between several mutually exclusive choices. For example, the cost of our time spent on monitoring and executing stock transactions instead of completing our official office work.
•  Missed trade costs arise from the failure to execute a trade in a timely manner.

Using Remisiers

Having a full time job requires us to contribute our time and effort to complete our responsibilities during office hours. If we are paying attention to the stock market activities, (which is open during working hours) we will not be able to concentrate on our primary work. Balancing between these two may lead to incomplete office work and a dissatisfied superior or at the same time, missing out on the best opportunity to trade stocks.

This is where having remisiers would be very useful. As our remisiers would will be spending most of their time following market movements throughout the day, they will be able to monitor the stock movements closely and carry out the transactions that we want in a more timely and effective manner. As they are closest to the market, sometimes, we will be able to find out a lot of inside stock market information that we may not have access to, which will help us to make better trading decisions.

Whilst there may be some additional costs in paying for remisier’s fees, these costs may be cheaper than the implicit cost to be incurred if we take our own time to monitor the stock market ourselves. Long-term investors who seldom trade may not feel the pinch from this cost as the difference between the costs of using remisiers versus self online trading for seldom users is insignificant. However, for frequent traders, they may have to evaluate such costs carefully.

It is hoped that with the above information, you are able to make a better decision between opting for a remisier or doing it on your own via online trading. The fundamentals of investing in the stock market, whether the trade orders are executed electronically or via remisiers, remain very important. Be sure to check out who your broker and remisiers are and whether they are licensed by the Securities Commission, Malaysia when choosing your online broker.

*Note: This article was written by Mr Ooi Kok Hwa, holder of the Capital Markets Services Representative’s License to carry on the business of investment advice under the Capital Markets and Services Act 2007. The information provided in this article is only for educational purposes and reflects the market conditions at a specified point in time, which may lapse and affect the relevance of this article. This article does not necessarily represent the official view of Securities Industry Development Corporation and should not be used as a substitute for legal or other professional advice.